Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

W.R. Berkley Stays Neutral

We are maintaining a Neutral recommendation on the shares of W.R. Berkley Corporation (WRB - Free Report) . Though the company’s second-quarter earnings exceeded the Zacks Consensus Estimates, we remain concerned by the competitive market environment and the ongoing soft insurance pricing.

Berkley has maintained the trend of premium growth since the past several quarters, mainly due to start-up units. Berkley started several new units since 2006 (when the soft market cycle started) to position itself to take advantage of the eventual market turn. The company is also witnessing rate increases.

With new units continuing to grow and established businesses no longer losing volume (retention rate was 80% for five successive quarters), overall growth is visible. We expect price rise to gain pace going forward as the new start-ups go into full swing coupled with rate improvement.

Berkley’s International unit is also showing impressive growth, which is surpassing the growth of other segments. Premium growth in the international unit is mainly from the emerging markets of Asia, South America, and the Nordic region of Europe. We expect the company’s international segment to post increasing premium in the future.

Berkley’s dividend track record also remains commendable. Moreover, the company maintains a solid balance sheet with sufficient liquidity. However, rising loss costs, low interest environment, and an increase in combined ratio are some of the negatives.

We also remain concerned over the rising loss costs and believe that the loss claims may accelerate over time. An increase in claim cost will offset the premium rate improvement seen lately, thus pressurizing the underwriting margins.

Further, the low interest rate environment, expected to continue through 2013, will pressure investment income as funds get reinvested at lower yields.

Also, Berkley’s combined ratio has increased over the past five years, indicating that claims payments and expenses grew faster than revenue from writing new premiums. We anticipate a moderate increase in 2012, mainly because of the lower base (written premium is expected to be modest), coupled with high catastrophe losses.

Resources

Client Support

Follow Us

Zacks Research is Reported On:

Yahoo

MSN

Marketwatch

Nasdaq

Forbes

Investors.com

Morningstar

Zacks Investment Research is an A+ Rated BBB Accredited Business.

Copyright 2016 Zacks Investment Research

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1988-2015 and were examined and attested by Baker Tilly Virchow Krause, LLP, an independent accounting firm.

Visit performance for information about the performance numbers displayed above.